Scenario 20-7 Suppose the Government Implemented a Negative Income Tax and Used

question 22

Multiple Choice

Scenario 20-7
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/6 of income) - $24,000
-Refer to Scenario 20-7. Below what level of income would families start to receive a subsidy from this negative income tax?

• A)$24,000
• B)$50,000
• C)$144,000
• D)$150,000

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Definitions:

Inelastic

Describes a situation where a change in price leads to a relatively small change in the quantity demanded or supplied.

Market Efficiency

A scenario where all existing information is entirely accounted for in the prices of assets, rendering it impossible to consistently outperform the market average in terms of returns.

Government

An organized system that establishes rules and regulations, governs, and provides services to its constituents.

Taxes

Essential fees levied by authorities on personal and corporate income, or added onto the costs of selected merchandise, services, and operations.